Principal Commissioner Of Income Tax (Central), Gurgaon v. M/S Parabolic Drugs Ltd., Faridkot

ITA-33-2018 IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-33-2018 Date of Decision: 4.2.2019 Principal Commissioner of Income Tax (Central), Gurgaon ....Appellant. Versus M/s Parabolic Drugs Ltd., Faridkot ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Rajesh Sethi, Sr. Standing Counsel with Mr. Tushar Gera, Advocate for the appellant.Mr. Tushar Gera, Advocate for the appellant. Mr. Veer Singh, Advocate for Mr. Surjeet Bhadu, Advocate for the respondent. *** AJAY KUMAR MITTAL, J. 1.This order shall dispose of two appeals bearing ITA Nos.33 of2018 and 426 of 2017 as according to learned counsel for the parties,identical questions of law and facts are involved therein. For brevity, thefacts are being extracted from ITA-33-2018. 2.ITA-33-2018 has been preferred by the revenue under Section260A of the Income Tax Act, 1961 (in short “the Act”) against the orderdated 18.10.2016 (Annexure A-3) passed by the Income Tax AppellateTribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 240/Chd/2015, claiming the following substantialquestions of law:- i)Whether on the facts and circumstances of the ii) iii) iv) case, the ITAT was right in concluding that therewas a difference in scope of proceedings underSection 153A of the Income Tax Act, 1961 for anabated assessment and for a completedassessment? Whether on the facts and circumstances of thecase, the ITAT was right in holding that noaddition can be made u/s 133A in respect ofcompleted assessment if no incriminating materialis found during search? Whether there is any restriction on the powers ofthe Assessing Officer under Section 153A of theIncome Tax Act, 1961 to confine only to the“incriminating material found during the search”,even though such words or conditions are notmentioned in the section per se?Whether on the facts and circumstances of the casethe ITAT was correct in interpreting Section 153Awhich starts with a non-obstinate clause statingtherein that the operation of Sections 139, 147,148, 149, 151 and 153 was deposed. Meaningthereby that in search cases the Assessing Officeris duty bound to take up the assessment u/s 153Aand that the above mentioned sections cannot beinvoked. Therefore, even if incriminating materialis not found during search, but if any escaped -3- v) vi) income or under-assessed income undisclosedincome has to be assessed for such completedassessment, then it has to be done in theproceeding u/s 153A in search cases?Whether on the facts and circumstances of the casethe ITAT was right to bring in special procedure ofblock assessment as laid in Chapter XIV B into thenew procedure of search assessment u/s 153Aintroduced by Finance Act, 2003, w.e.f. 1.06.2003,when Chapter XIV B was scrapped to reducelitigation and disputes regarding treatment of aparticular income as undisclosed and whether it isrelatable to material found during search (FinanceBill 2003 under head “Assessment in search cases– abolition of the special procedure in ChapterXIV-B and introduction of new provisions”)?Whether on the facts and circumstances of the casethe ITAT was right in ignoring the basic differencein search assessment u/s 153A and chapter XIV Bbeing that in section 153A the “total income” hasto be assessed or reassessed in six separate A.Y.s,as opposed to assessing the “undisclosed income”in the scrapped Chapter XIV B for block period ina single assessment? vii)Whether on the facts and circumstances of the casethe ITAT was right in following Delhi High Court vii)Whether on the facts and circumstances of the casethe ITAT was right in following Delhi High Court decision in the case of CIT vs. Kabul Chawla (61taxman.com 412) when the Hon'ble HC itselfadmits in para 37 (iv) the “Although section 153Adoes not say that additions should strictly made onthe basis of evidence found in course of search...”thereby interpreting the statute in the mannerwhich were never worded or intended by thelegislature? viii) Whether on the facts and circumstances of the casethe ITAT has erred in ignoring the Principle ofStrict Interpretation of statues when the wordsused in the statue i.e. sec. 153A(1)(b) of the ITAct, 1961 are Assess or Reassess the “TotalIncome”?the ITAT has erred in ignoring the Principle ofStrict Interpretation of statues when the wordsused in the statue i.e. sec. 153A(1)(b) of the ITAct, 1961 are Assess or Reassess the “TotalIncome”? ix)Whether on the facts and circumstances of the casethe ITAT was right in not following the Hon'bleSC judgment on interpretation of statue in the caseof Smt. Tarulata Shyam & Other vs. CIT (108 ITR345), Keshavji Ravji and Co. vs. CIT (183 ITR 1),Padamsundara Rao (Decd.) & others vs. State ofTamil Nadu 255 ITR 147, Prakash Nath Khanna &Other vs. CIT 266 ITR 1, Institute of CharteredAccountants of India vs. Price Water House 93Taxman 588?the ITAT was right in not following the Hon'bleSC judgment on interpretation of statue in the caseof Smt. Tarulata Shyam & Other vs. CIT (108 ITR345), Keshavji Ravji and Co. vs. CIT (183 ITR 1),Padamsundara Rao (Decd.) & others vs. State ofTamil Nadu 255 ITR 147, Prakash Nath Khanna &Other vs. CIT 266 ITR 1, Institute of CharteredAccountants of India vs. Price Water House 93Taxman 588? x)Whether on the facts and circumstances of the casethe ITAT is not following the Hon'ble SCthe ITAT is not following the Hon'ble SC Judgment on the issue of additions in search caseu/s 153A in the case of CIT vs. Anil Kumar Bhatia352 ITR 492 (Delhi HC), Madugula Venu vs. DIT29 Taxman.com 200 (Delhi HC), CIT vs. RajKumar Arora 367 ITR 517 (Allahabad HC),Canara Housing Development Company vs. DCIT49 taxman.com 98 (Karnataka HC), Filatex IndiaLtd. vs. CIT 229 Taxman 555 (Delhi HC), SunnyJacob Jewellers and Wedding Centre, 362 ITR 664(Kerala HC) and CIT vs. Continental WarehousingCorporation 64 taxman.com 34 (SC)?u/s 153A in the case of CIT vs. Anil Kumar Bhatia352 ITR 492 (Delhi HC), Madugula Venu vs. DIT29 Taxman.com 200 (Delhi HC), CIT vs. RajKumar Arora 367 ITR 517 (Allahabad HC),Canara Housing Development Company vs. DCIT49 taxman.com 98 (Karnataka HC), Filatex IndiaLtd. vs. CIT 229 Taxman 555 (Delhi HC), SunnyJacob Jewellers and Wedding Centre, 362 ITR 664(Kerala HC) and CIT vs. Continental WarehousingCorporation 64 taxman.com 34 (SC)? xi)Whether the Hon'ble ITAT was justified infollowing the decision of the Hon'ble High Courtdated 28.5.2015 in the case of CIT vs. KabulChawla, when the said decision was distinguishedin the Revenue favoring judgment of the Hon'bleDelhi High Court dated 27.10.2016 in the case ofSmt. Dayawanti through Smt. Sunita Gupta (L/H)vs. CIT?following the decision of the Hon'ble High Courtdated 28.5.2015 in the case of CIT vs. KabulChawla, when the said decision was distinguishedin the Revenue favoring judgment of the Hon'bleDelhi High Court dated 27.10.2016 in the case ofSmt. Dayawanti through Smt. Sunita Gupta (L/H)vs. CIT? 3.A few facts necessary for adjudication of the instant appeal asnarrated therein may be noticed. The assessee filed its return of income forthe assessment year 2005-06 at a total income of ` 69,12,480/- on29.10.2005. A search under Section 132(1) of the Act was conducted onM/s Surya, Nectar & Parabolic Group of cases on 17.9.2010 and theassessee was one of the concerns covered under Section 132 of the Act.The Assessing Officer framed the assessment vide order dated 31.3.2013 ITA-33-2018 -6- 3.A few facts necessary for adjudication of the instant appeal asnarrated therein may be noticed. The assessee filed its return of income forthe assessment year 2005-06 at a total income of ` 69,12,480/- on29.10.2005. A search under Section 132(1) of the Act was conducted onM/s Surya, Nectar & Parabolic Group of cases on 17.9.2010 and theassessee was one of the concerns covered under Section 132 of the Act.The Assessing Officer framed the assessment vide order dated 31.3.2013 ITA-33-2018 -6- (Annexure A-1) assessing the total income at ` 3,05,13,573/-. Feelingaggrieved by the order, Annexure A-1, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. TheCIT(A) vide order dated 16.12.2004 (Annexure A-2) upheld the additionmade by the Assessing Officer and dismissed the appeal. Still dissatisfied,the assessee filed an appeal before the Tribunal. The Tribunal vide orderdated (Annexure A-3) allowed the appeal of the assessee and deleted theaddition made by the Assessing Officer. Hence, the present appeals by therevenue. 4.At the outset, learned counsel for the respondent-assesseesubmitted that vide order dated 23.08.2018 (appended as Annexure R-1)passed by National Company Law Tribunal, “Chandigarh Bench”,Chandigarh (hereinafter referred to as 'NCLT') in a petition filed underSection 9 of the Insolvency and Bankruptcy Code, 2016 (for short 'theCode'), admitted the petition filed by an operational creditor, namely, M/sWeather makers Pvt. Ltd. against the respondent-Company and themoratorium was declared for all of the following in terms of Section 14(1)of the Code:- “(a)the institution of suits or continuation of pending suits orproceedings against the corporate debtor includingexecution of any judgment, decree or order in any courtof law, tribunal, arbitration panel or other authority;proceedings against the corporate debtor includingexecution of any judgment, decree or order in any courtof law, tribunal, arbitration panel or other authority;(b)transferring, encumbering, alienating or disposing of bythe corporate debtor any of its assets or any legal right orbeneficial interest therein;the corporate debtor any of its assets or any legal right orbeneficial interest therein; (c)any action to foreclose, recover or enforce any security ITA-33-2018 -7- interest created by the corporate debtor in respect of itsproperty including any action under the Securitizationand Reconstruction of Financial Assets and Enforcementof Security interest Act, 2002; (d)the recovery of any property by an owner or lessor wheresuch property is occupied by or in the possession of thecorporate debtor.”such property is occupied by or in the possession of thecorporate debtor.” 5.It was urged on behalf of the respondent-assessee that in viewof the decision of the Delhi High Court in Principal Commissioner of Income Tax v. Monnet Ispat and Engergy Ltd. ITA Nos. 533, 552 and554 of 2017 decided on 4.9.2017, wherein, it had been laid down that byvirtue of Section 238 of the Code, it is the Code that would applynotwithstanding anything inconsistent therewith contained in any other lawfor the time being in force, where, NCLT had admitted the petition underthe Code against the assessee and had prohibited, inter alia, 'the institutionof suits or continuation of pending suits or proceedings' against theassessee. It was contended that this would include the present appeal filedby the revenue against the order of the Tribunal in respect of the tax liabilityof the assessee. However, the Delhi High Court had disposed of the appealswith liberty to the revenue to revive them subject to the furthers orders thatmight be passed by the NCLT. Further, the Special Leave to Appeal (C)No. 6483-2018 filed against the said order was dismissed by the Apex Courtvide order dated 10.8.2018 with the following observations:- “Given Section 238 of the Insolvency and BankruptcyCode, 2016, it is obvious that the Code will overrideanything inconsistent contained in any other enactment, ITA-33-2018 including the Income Tax Act. We may also refer int his connection to Dena Bank v.Bhikhabhai Prabhudas Parekh and Co. & others(2000) 5 SCC 694 and its progeny, making it clear thatincome tax dues, being in the nature of Crown debts, donot take precedence even over secured creditors, who areprivate persons. We are of the view that the High Court of Delhi is,therefore, correct in law. Accordingly, the Special Leave Petitions are dismissed.” 6.Prayer was made by learned counsel for the respondent-assessee for an appropriate order in terms of the order passed by the DelhiHigh Court. Learned counsel for the appellant-revenue, however, could notseriously oppose the prayer made by the respondent-assessee.7.In view of the above, the present appeals are disposed of withliberty to the revenue to revive the same subject to the further orders of theNCLT. (AJAY KUMAR MITTAL) JUDGE February 4, 2019(MANJARI NEHRU KAUL)gbsJUDGE Whether Speaking/ReasonedYesWhether ReportableYes